Wanxiang Wins U.S. Approval to Buy Battery Maker A123

Jan. 30 (Bloomberg) -- Wanxiang Group Co., China’s biggest
auto-parts maker, won approval from the Committee on Foreign
Investment in the U.S. to buy most of the assets of A123 Systems
Inc., the bankrupt electric-car battery maker backed with U.S.
government funds.

Approval from CFIUS, as it is known, was the final hurdle
that Wanxiang needed to overcome to complete the deal. The
federal interagency group led by the Treasury Department was
reviewing the sale after members of Congress expressed national-security concerns over allowing a foreign competitor to obtain
the technology developed with government backing.

Wanxiang, which won bankruptcy court approval of the
acquisition Dec. 11, completed the purchase yesterday, Pin Ni,
president of U.S. unit Wanxiang America Corp., said in an e-mail. Wanxiang America acquired substantially all of A123’s
automotive, grid and commercial business assets for about $256.6
million. A123 and Wanxiang tried to mollify congressional
anxiety by excluding the battery maker’s government business
from the deal, which was sold to Woodridge, Illinois-based
Navitas Systems LLC for about $2.25 million.

“We’re pleased the government has completed its review and
provided us with the go-ahead to finalize this transaction,” Ni
said in a statement. “The future is bright for A123. It is a
company with exceptional talent and potential, and Wanxiang
America is committed to its long-term success and the
continuance of its U.S. operations.”

Deal Scuttled

The Waltham, Massachusetts-based battery maker filed for
bankruptcy in October after a previous deal with Wanxiang was
scuttled amid congressional Republicans’ reluctance to allow its
sale to a Chinese company. A123 listed assets of $459.8 million
and debt of $376 million as of Aug. 31 in court documents.

“Nothing provided by CFIUS has changed my opinion that the
core technology developed by A123,” and the related
intellectual property, “can be separated along A123’s business
lines,” said Representative Bill Huizenga, a Republican
representing Michigan’s 2nd Congressional District, in an e-mailed statement. “American taxpayers should not be funding
technology that will in turn be used in competition against
American companies,” he said, adding that he will look into
legislation to prevent sales of taxpayer-funded “sensitive
technologies” to foreign companies in the future.

Federal Grant

A123, which was awarded a federal grant of as much as
$249.1 million and only used about $132 million to build two
plants in Michigan, held a December auction where Wanxiang beat
a joint bid from Milwaukee-based Johnson Controls Inc. and
Tokyo-based NEC Corp.

“The Energy Department’s Recovery Act grant to A123 was
used for the construction of brick and mortar advanced battery
manufacturing facilities at two Michigan locations,” Bill
Gibbons, a department spokesman, said in an e-mailed statement.
The funds weren’t used for the company’s research and
development of battery technology, he said.

“The purchase of these assets includes the Energy
Department’s requirement that the plants and equipment partially
paid for by the Recovery Act stay in Michigan and continue to
operate, generating job opportunities for American workers,”
Gibbons said.

Joint Venture

As part of the purchase Wanxiang, based in Hangzhou, China,
will get A123’s cathode powder plant in China and its share of a
joint venture with Shanghai Automotive Industry Corp., called
Shanghai Advanced Traction Battery Systems Co., in addition to
the battery technology used in Fisker Automotive Inc.’s Karma
sedan.

Fisker, A123’s main customer, said it was awaiting the sale
of the company’s Michigan plant so it could resume production of
the $103,000 plug-in Karma sedan.

A123, whose automotive business supplies electric-car
batteries to about a dozen customers, has facilities in the
Michigan cities of Livonia and Romulus.

The grid business focuses on energy generation,
transmission and distribution while the commercial division
develops products for industries such as telecommunications,
industrial robotics and power tools, according to court papers.
A123 worked with the government on portable power solutions,
unmanned aerial vehicles, pulsed power weapons as well as small
energy cells for remote devices.

The case is In re A123 Systems Inc., 12-12859, U.S.
Bankruptcy Court, District of Delaware (Wilmington).